{"id":11648,"date":"2023-12-23T20:42:09","date_gmt":"2023-12-23T20:42:09","guid":{"rendered":"https:\/\/connectwithfund.com\/economy\/opinion-the-top-1-of-americans-arent-to-blame-for-income-inequality\/"},"modified":"2023-12-23T20:42:09","modified_gmt":"2023-12-23T20:42:09","slug":"opinion-the-top-1-of-americans-arent-to-blame-for-income-inequality","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=11648","title":{"rendered":"Opinion: The top 1% of Americans aren\u2019t to blame for income inequality"},"content":{"rendered":"
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\n \u201c<\/span>The belief that income inequality has risen sharply in the U.S. may be wrong.\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

For decades, the share of national income held by the top 1% in the United States has soared. Income inequality, which former U.S. President Barack Obama\u00a0declared\u00a0\u201cthe defining challenge of our time,\u201d has become a major issue in U.S. politics, with both\u00a0Republicans<\/a>\u00a0and\u00a0Democrats\u00a0proposing higher taxes on the rich. <\/p>\n

The idea,\u00a0peddled by\u00a0nationalists and progressives, that the economic system is rigged against ordinary workers and households has also fanned the flames of populism. Some even\u00a0argue\u00a0that economic inequality threatens democracy.<\/p>\n

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And yet, the belief that income inequality has risen sharply may be wrong. New research by Gerald Auten of the U.S. Treasury Department and David Splinter of the congressional Joint Committee on Taxation\u00a0finds\u00a0that the after-tax income share of the top 1% has barely changed since 1962. This stands in stark contrast to the work of\u00a0Thomas Piketty,\u00a0Emmanuel Saez, and\u00a0Gabriel Zucman, which has shaped policy and political debate in recent years: the trio\u00a0conclude\u00a0that the income share of the top 1% increased by roughly 55% over the same period.<\/p>\n

Rather than answer the question of who is right (although I believe that Auten and Splinter are closer to the truth), it is more useful to consider whether the top 1% should be our focus. Seen from a broader perspective, the debate over income equality does little for those who need help the most.<\/p>\n

The discussion has mostly centered on how much of the economic pie each group gets. But the size of the pie is not fixed. Since 1962, real economic output in the U.S. has\u00a0increased<\/a>\u00a0by 499%, leading to significant improvements in living standards and human welfare. The percentage of Americans in poverty has\u00a0decreased\u00a0substantially, new medicines and therapies have greatly enhanced people\u2019s quality of life, and more women have\u00a0entered\u00a0the workforce.<\/p>\n

This considerable improvement in Americans\u2019 well-being is more striking than the share of income accruing to the country\u2019s highest earners. Compare a median-income U.S. household to one in the top 1%. Each has access to high-quality medical care and pharmaceuticals, each can take nice vacations, each can eat in the same restaurants, read the same books and watch the same television shows, and each has warm clothes and a comfortable home.<\/p>\n

To be sure, there are disparities \u2014 the wealthier family has better health care, flies first-class to the Caribbean on holiday, occasionally eats at Michelin-starred restaurants, and has a bigger house. But this does not negate that inequality in quality of life has shrunk dramatically in recent decades. The quality-of-life gap between a median-income household and one in the top 1% a century ago, and even a century before that, was much larger.<\/p>\n

Moreover, the economic and philosophical underpinnings of this obsession with the top 1% are far from sound. In a market economy, income is earned, not distributed. In a democracy, inequality is acceptable if it is driven by productivity differences \u2014 and the best evidence shows a\u00a0strong link\u00a0between pay and productivity in the U.S.<\/p>\n

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\n \u201c<\/span>How much \u2018should\u2019 the top earners \u2018receive\u2019 from society?\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

Ultimately, the income-inequality debate is normative: How much \u201cshould\u201d the top earners \u201creceive\u201d from society? It would be better to start from the premise that the wealthiest have earned their income, and to ask how much of these earnings should be taken by the government. According to the nonpartisan Congressional Budget Office (CBO), the\u00a0top 1%\u00a0earned 17.6% of all market income and paid 24.7% of all federal taxes in 2019, suggesting that they are already on the hook for quite a bit.<\/p>\n

Ironically, concern about the income gap exploded during a period when, as I show in my book\u00a0The American Dream Is Not Dead (But Populism Could Kill It)<\/em>, measured inequality was stagnant or declining. Using data from the CBO, I found that income inequality across all households \u2014 after accounting for taxes and government transfers and estimated with a\u00a0Gini coefficient\u00a0\u2014 increased by 29% between 1979 and 2007, but then fell by more than 5% between 2007 and 2019.<\/p>\n

To understand this trend, one must focus on the bottom 99%. Even though inequality was rising in the 1990s, average wages were also increasing; Americans were not concerned about whether they were growing faster for some groups than for others. But after the 2008 financial crisis,\u00a0average wages\u00a0plummeted. In fact, they fell so sharply for the bottom half of workers that it took until 2014 for the median real wage to\u00a0recover its 2007 level. This prolonged period of wage stagnation fomented anger and a sense of injustice, of a \u201crigged\u201d economic game, which gave rise to populism.<\/p>\n

The lesson is clear: People care about how they themselves are doing, and not about a group of people with whom they seldom interact. People are not as dripping with envy as the debate over inequality would have you think.<\/p>\n

Anyone concerned about the health of American democracy should be more worried about wage growth for the bottom half of workers than the income gap. If upward mobility is the goal, then we must stop treating economic success as if it were a\u00a0problem<\/a>\u00a0rather than something worth celebrating. Policymakers should focus on providing the poor and the working class with onramps to economic opportunity.<\/p>\n

The 1% don\u2019t deserve nearly as much attention as they receive. It would be better to concentrate on increasing the wages and incomes of those at the bottom, who are most in need of a helping hand.<\/p>\n

Michael R. Strain, director of economic policy studies at the American Enterprise Institute, is the author, most recently, of\u00a0The American Dream Is Not Dead (But Populism Could Kill It)\u00a0(Templeton Press, 2020).<\/em><\/p>\n

This commentary was published with the permission of\u00a0Project Syndicate <\/em>\u2014 The Myth of the 1%<\/em> <\/p>\n

More:<\/strong> <\/strong>This family just bumped Walmart\u2019s Waltons as the richest in the world\u00a0<\/p>\n

Also read: <\/strong>The growing risk of global disorder<\/p>\n<\/p><\/div>\n<\/div>\n